Investing in art no longer a sketchy business

INVESTING in fine art used to be an esoteric pursuit. Since the financial crisis, however, art has become a booming asset class in its own right.Turbine+Art+Fair+XXX

Today, the luxury art market is worth about $10bn a year. Twenty years ago, only 5% of the world’s wealthy owned art; today, that figure has doubled or tripled. The UK’s Fine Art Fund Group estimates that 40% of wealthy people will hold art in the future. Unsurprisingly, growth in art sales is being driven largely by burgeoning wealth in emerging markets such as the United Arab Emirates, Mexico, China and Brazil.

Compared with stocks and bonds, art is a very different kind of asset, distinguished by intangible qualities such as the pleasure and social standing it offers its owners. Art has a low correlation with other assets, such as stocks and gold, so investing in art is good for diversification.

Last but not least, art investing also allows for investment with purpose, not simply for growth. That is, it can have a positive social and developmental effect for local artists and the arts more broadly.

Taken together, these factors mean art comprises a unique store of value with potentially high returns. On the downside, art is sometimes difficult to value and, like other asset classes, its performance over time can be unpredictable.

Should you be thinking about investing in African art? Having been underrecognised for years, African contemporary art is increasingly attracting attention, thanks in part to a rising western interest in multiculturalism, and a hunger for new material and markets.

Interest from within Africa is being led by Nigerian and South African collectors, while renowned British and US museums and auction houses have all started to showcase African talent. This year will see the debut of the first contemporary art and design fair in Paris to be dedicated to African contemporary art, while the 2015 Venice Biennale is being directed for the first time by an African-born director, Okwui Enwezor. A new art fund, the Scheryn Art Collectors Fund launched in March in Cape Town, aiming to be the “pre-eminent” African art investment vehicle on the continent.

There is another trend at play: thanks to the robust global demand for digital channels, especially among those under-40, art is moving online in a big way. This has led to a host of new channels to explore, “test-drive” and buy fine art.

Tech startup Artsy has punched above its weight, building an online database of more than 230,000 images of art in five years; its mobile app for art collectors has been downloaded 300,000 times. Meanwhile, Paddle8, an online-only auction house, hosts nonprofit auctions as well as commercial ones.

How does one get started? The internet is a vibrant and nonintimidating space to start learning about art, and when you’re ready to venture out for some local real-life viewing, you’ll be pleasantly surprised at how much SA’s galleries and auction houses have to offer.

Buying and selling art at the high end tends to require advice from a variety of specialists, and is better considered as a long-term investment. Over time, you will probably engage with art experts, dealers, conservators, insurers, shipping agents, tax consultants, maybe even a lawyer or two — and probably a combination of the above. Bear in mind that you won’t just be paying for the artwork itself (and the dealer’s or auctioneer’s commission): there are also associated costs such as maintenance, storage and insurance.

At the lower end of the market, however, among up-and-coming artists, art is affordable. Art may not pay quarterly dividends — and most art investments won’t see the extraordinary returns witnessed at Sotheby’s or Christie’s — but it preserves your capital in diversified form, it looks great on the wall, and it offers continuing pleasure.

• Taylor is founder and director of Guns & Rain, an online platform for African contemporary art,  and dealer for Ulrich de Balbian, which will be exhibiting at the Turbine Art Fair from Thursday until Sunday